White House and G.O.P. Leaders Reach Deal on Principles of Tax Overhaul

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Speaker Paul D. Ryan in Washington on Thursday. Republicans said they planned to heed the lessons from their health care legislation efforts and use a more conventional process to get a tax bill drafted.CreditStephen Crowley/The New York Times

WASHINGTON — After six months of deliberations and occasional quarreling, the top Republican tax negotiators in Congress and the Trump administration declared on Thursday that they had united behind a set of common principles that would guide them as they rush to complete the first overhaul of the tax code in three decades — and that they would do it by the end of this year.

The five-paragraph joint statement in many respects raised more questions than it answered, providing fewer specifics than the previous plans released by House Republicans and President Trump. The lack of detail highlighted the challenge that Republicans face as they try to make difficult trade-offs on legislation that could reshape the entire economy.

But the long-awaited sign of progress may help generate momentum behind the Republicans’ agenda as their promise to repeal the Affordable Care Act remains unfulfilled and as infighting plagues the White House.

The most notable development was the jettisoning of the proposed border adjustment tax on imports. Speaker Paul D. Ryan, Republican of Wisconsin, had suggested the tax a year ago as a central plank of the plan, arguing that it would accelerate economic growth and protect American manufacturers. But the idea drew the ire of retailers, energy companies and the billionaire Koch brothers, who invested heavily to undermine it. Mr. Trump was cool to it from the beginning, and many Republicans in the House and the Senate began voicing concerns in recent months.

To the glee of border tax skeptics, on Thursday the provision officially died.

“We are now confident that, without transitioning to a new domestic consumption-based tax system, there is a viable approach for ensuring a level playing field between American and foreign companies and workers, while protecting American jobs and the U.S. tax base,” the negotiators said in the statement, acknowledging that there were too many “unknowns” associated with the idea.

The so-called big six — Mr. Ryan; Representative Kevin Brady of Texas, the House Ways and Means Committee chairman; Senator Mitch McConnell of Kentucky, the majority leader; Senator Orrin G. Hatch of Utah, the Senate Finance Committee chairman; Steven Mnuchin, the Treasury secretary; and Gary D. Cohn, the National Economic Council director — huddled on Wednesday evening to hash out differences ahead of the August recess.

Republicans appear poised to heed the lessons from their health care legislation efforts and use a more conventional process to get a tax bill drafted. Policy staff members for the House Ways and Means Committee and for the Senate Finance Committee are expected to work through August to write the tax legislation. Mr. Trump is expected to spend time next month barnstorming the country to make the case for the tax overhaul.

How the legislation will actually look remains unclear. The statement on Thursday said Republican leaders were prioritizing permanent changes that would reduce tax rates for all American businesses, encourage companies to bring back cash parked abroad and allow “unprecedented” capital expensing, or write-offs of big investments.

“Above all, the mission of the committees is to protect American jobs and make taxes simpler, fairer and lower for hard-working American families,” they wrote.

No major changes have been made to the tax code since 1986, and Republicans face big obstacles as they try to reach their goal of passing a bill in 2017. Delays in passing health care legislation laid bare the deep divisions within the Republican Party and suggested that sweeping changes to tax laws — which are generally considered even more complicated than health care policy — could take even longer and drag into next year.

Republicans in Congress must also finish or abandon their effort to repeal the Affordable Care Act, raise the debt ceiling and pass a budget resolution before they can expect to fully dig in to a tax bill.

The fate of the border adjustment tax underscored how difficult it would be to make other big changes to the tax code. Armies of lobbyists have been trawling Washington, preparing to fight for and against various provisions. The taxation of small businesses, deductions for corporate interest expenses and the state and local tax deduction are expected to lead to the biggest battles. And no guidance was offered on these fronts on Thursday.

Mr. Ryan and Mr. Brady were both dismissive of Mr. Trump’s recent suggestion that perhaps the rich should see their tax rates increase to offer more relief to the middle class.

To avoid getting bogged down, some Republicans have said that the party should simply push through short-term tax cuts, even if they would add to deficits and expire in 10 years. So far, however, Republican leaders remain committed to a deficit-neutral tax plan that would not reduce tax revenue.

Wall Street and business groups have grown increasingly impatient that the centerpiece of Mr. Trump’s economic agenda is stalling. The statement of progress was welcomed as a sign of hope that something might get done.

“The engagement and enthusiasm for pro-growth tax reform from Trump administration officials and congressional lawmakers is what will propel this over the finish line,” said Neil Bradley, chief policy officer at the U.S. Chamber of Commerce.

The demise of the border tax, which would have taxed imports and let exports go untaxed, also came as a relief to retailers, who have said for months that it would cripple an industry. On Thursday, they cheered the development.

“It’s an important win for retailers and American families,” said Brian Dodge, a spokesman for the Retail Industry Leaders Association. “It allows us to pivot to working with lawmakers to getting tax reform done.”

American exporters expressed hope that they would still benefit from a tax overhaul. “From the beginning, we have pushed for significantly lower corporate tax rates, permanent reforms that give businesses the certainty they need to invest here in the U.S., and a territorial tax system that levels the playing field for American companies competing abroad,” said Ken Spain, a spokesman for the American Made Coalition.

Democrats scoffed at the latest Republican outline as another vague set of ideas that would benefit the rich. “Republicans are dripping tax ideas out like a leaky faucet with no specifics to back them up,” said Senator Ron Wyden of Oregon, the ranking member of the Senate Finance Committee. He urged Republicans to work with his party in a bipartisan manner.

Despite claims that they are open to working with Democrats, it was clear on Thursday that such overtures from Republicans were halfhearted.

Mr. Brady said that lawmakers from the House and Senate tax-writing committees would convene next month at the Ronald Reagan Ranch in California, where they would contemplate the tax code and seek inspiration to conquer the big legislative task that awaits. Mr. Brady plans to give a speech at the event, which is still in the planning stages.